This has led to some enormous contracts, including a
recent $4
billion deal for the Los Angeles Lakers. Last year alone, the
Lakers received $122 million in local television revenue, a
record for a U.S. sports team.

When the Dodgers recently sold for $2 billion, Dallas Mavericks
owner Mark Cuban was one of the people bidding on the team.
However, he bowed out because the
deal became more about the television rights than about the
team, pushing the price higher than he was willing to go.

Following the most recent NBA lockout, the owners and players
agreed to reduce the amount of revenue shared with the players
from 57% under the previous collective bargaining agreement to
49-51% in the new deal.

So not only is revenue growing for the league and for individual
teams, but the owners are taking a much bigger cut increasing the
profit margins of all teams.

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Star Power

In addition to putting more money into the pockets of the owners,
a salary cap also limits how much the teams can pay their top
stars. This is important because it allows teams in the NBA to
promote their stars while minimizing the affect that the players'
popularity will have on contract negotiations.

In baseball, teams often have to overpay for popular players
(e.g. Derek Jeter) as there is no hard cap on team payrolls.

In the NBA, the popularity of NBA stars increases the popularity
of NBA teams and more stars means more merchandise sold and
tickets purchased. Meanwhile, the league has a nice, cushy
situation where a player like
LeBron James is underpaid by at least $10 million.

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Supply and demand

In the end, the value of team is whatever somebody is willing to
pay for it, and basic economics tells us the value of the item
will go up if demand exceeds supply.